Morepen gets fortnight to induct govt directors

The Company Law Board (CLB) today reserved its order on appointment of government directors on the board of Morepen Laboratories. It has given the company a fortnight to voluntarily seek appointment of government directors instead of them being appointed on the orders of CLB.

The counsel for the government argued that the number of government directors should exceed or be equal to the number of existing directors in the company.

"We don't want 'ornamental' directors, therefore the number of government directors should be more than or equal to the existing directors," the government counsel said.

The government has sought appointment of six government directors for a period of three years on the company's board. Meanwhile in defence, the company's lawyer submitted that the company had recently appointed eminent people who had earlier served in the Reserve Bank of India and Life Insurance Corporation of India on the company's board.

"The company is working on a financial deal with the bankers and at this point in time appointment of government directors would not serve any purpose," he added.

Morepen Laboratories has defaulted on repayment of fixed deposits and its proceeds from the global depository receipts (GDRs) are stuck with the Debt Recovery Tribunal (DRT) as it has also defaulted on its repayment to financial institutions.

Morepen had raised $15.25 million in GDR in 2003 which are locked up in a case at DRT. The government has, in its reference under the Companies Act, alleged mismanagement on the part of the company based on the scrutiny of accounts as on September 30, 2003.

The judge at CLB, during the course of the hearing, suggested that it would be better if the company itself sought appointment of government directors. This would be useful for the company as it is entangled in regulatory issues.

"What is the harm in appointing government directors? They would be in a position to monitor the inflow and outflow of funds," the government counsel argued.

Sushil Suri, chairman and managing director of Morepen, had earlier told Business Standard that he was actively looking to get some investors into the company to get the business going while saying that appointment of government directors would not serve any purpose.